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Role of Disciplinary Tools in Maintaining Bank Performance and Financial Stability: Evidence from Emerging Economies

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  • Anjali Sain
  • Smita Kashiramka

Abstract

The aim of this study is to examine the role of disciplinary tools, that is, capital adequacy requirement and market discipline in maintaining the banks’ performance and financial stability. The study employs a panel dataset of 600 commercial banks from BRICS economies for the period ranging from 2005 to 2020 using the panel regression. The robustness of the results is validated using the system GMM (generalized method of moments). The study reveals that, in a linear model, capital adequacy ratio has a positive influence on performance and stability, and market discipline has a negative influence on performance and stability. In a non-linear model, capital adequacy ratio has a concave relationship. Further, the study discusses the critical determinants of profitability and stability. JEL Classification: G21, G28, G32

Suggested Citation

  • Anjali Sain & Smita Kashiramka, 2024. "Role of Disciplinary Tools in Maintaining Bank Performance and Financial Stability: Evidence from Emerging Economies," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 23(1), pages 7-31, March.
    • Handle: RePEc:sae:emffin:v:23:y:2024:i:1:p:7-31
    DOI: 10.1177/09726527231183015
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    More about this item

    Keywords

    Bank performance; financial stability; market discipline; system GMM;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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